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U.S. regulators bar use of government funds for Huawei, ZTE over security concerns

Ambassador to Canada dismisses notion Huawei could compromise security with 5G tech
WATCH: Ambassador to Canada dismisses notion Huawei could compromise security with 5G tech

U.S. communications regulators have cut off government funding for equipment from two Chinese companies, citing security threats.

The Federal Communications Commission also proposed requiring companies that get government subsidies to rip out any equipment from Huawei and ZTE that they already have in place.

It’s the latest action by the U.S. government against Chinese tech and telecom companies.

READ MORE: Chinese ambassador reiterates call for Canada to free Meng Wanzhou

The FCC voted unanimously Friday to bar U.S. telecommunications providers from using government subsidies to buy equipment from Huawei or ZTE. The FCC’s order mostly affects small, rural companies, as larger U.S. carriers do not use equipment from those Chinese companies.

In a statement Saturday, Huawei urged the FCC to reconsider what it called a “profoundly mistaken” and “unlawful order.”

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It said the decision was “based on selective information, innuendo, and mistaken assumptions” and that “these unwarranted actions will have profound negative effects on connectivity for Americans in rural and underserved areas across the United States.”

Should Canada allow Huawei to build the country’s 5G network?
Should Canada allow Huawei to build the country’s 5G network?

As for replacing existing equipment, the FCC is asking for comment on how to help rural telecoms financially. Bills in Congress have proposed setting US$700 million to US$1 billion aside.

A trade group for small rural wireless carriers has said that it would cost up to $1 billion for its dozen companies to replace their Huawei and ZTE equipment. It says that Huawei has 40 customers in the U.S. (Huawei is also a member of the trade group, the Rural Wireless Association.)

The group said Friday that it was “cautiously optimistic” that the FCC’s approach would let its companies keep providing services to customers and give them funding to replace any banned equipment.

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The Huawei statement said the lack of funding would hurt rural and disadvantaged communities.

“Without access to those solutions, these carriers will lose their ability to provide reliable and high-speed telecommunications and internet services,” it said. “Rural schools, hospitals, and libraries will feel the effects. And, due to reduced competition in the market for telecommunications equipment, particularly in cutting-edge 5G networks, all Americans will pay higher prices for these critical services.”

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Huawei reiterated its desire to work with the FCC to lay to rest concerns over national security and ensure “best practices” are used in U.S. telecommunications systems.

U.S. extends Huawei reprieve for another 90 days
U.S. extends Huawei reprieve for another 90 days

Huawei is the world’s biggest supplier of telecom gear as well as a major cellphone manufacturer. The U.S. government has said that Huawei poses an espionage threat, but has presented no evidence of its equipment being used for spying by the Chinese government. The U.S. has been pressuring allies to ban Huawei from their networks and has restricted exports of U.S. technology to Huawei, though numerous loopholes have been exploited.

READ MORE: Huawei founder, whose daughter is under arrest in Canada, speaks out about U.S. pressure

ZTE did not respond to requests for comment Friday. ZTE has also denied that China uses its products for spying.

A congressional report in 2012 labeled both Chinese companies as security risks.

Commissioner Jessica Rosenworcel, a Democrat, said the FCC’s move Friday was a good one, but took too long and did not go far enough. She said there needs to be a “coordinated national plan” for securing next-generation cellular networks, known as 5G.